Our
suppliers have breached the contract they have with us and we want to take
action against them. Must the company sue the suppliers or can the
directors sue on the company's behalf?

If
a contract was entered into between your suppliers and the company, then
proceedings must be commenced in the company name. If your company is
trading under another name then it may be described as A Limited trading
as XYZ.

Please
note that if the company is run by a board of directors, one director
alone cannot institute proceedings on behalf of the company. The decision
must be made by the board collectively.

If
your company is in liquidation, you can only sue through the liquidator,
although the company is still referred to in the proceedings by its own
name. This is also the case if your company is in receivership or
administration.

Litigation
is expensive. Must our company instruct lawyers to represent us in court
if our claim proceeds to trial?

In
1998 the Civil Procedure Rules (CPR) drastically changed the way
litigation is conducted. Until the implementation of the CPR, it was
normal for companies to use lawyers to pursue a claim through the court.
However, (sadly for lawyers) your company can now be represented at trial
by one of itís employees if:

the particular employee is authorised to represent the
company at the trial

the court gives permission for that employee to
represent the company at trial.

I am the
director of a company that may have been trading whilst insolvent and I am
concerned about my personal position. What can I do?

You
could potentially be personally liable for any debts the company incurs
after you became aware it was insolvent. You could also be disqualified
from acting as a director for between two and 15 years.

To
try and avoid either of these scenarios, you should do some or all of the
following:

obtain independent financial advice if you have any
concerns about the financial viability of the company

make sure the company has up-to-date financial
information. If management accounts have not been prepared, they
should be done on a weekly or monthly basis

report any concerns you have about the financial state
of the company to the other directors as soon as possible. If your
concerns are raised at a board meeting, they should be properly
recorded in the minutes

if you believe the company should not be incurring
further credit, because it cannot pay either trade or Crown debt,
recommend to your co-directors that the company stops trading

if the other directors wish to carry on trading,
consider resigning as a director

if the company cannot pay its debts recommend to the
board that they seek an insolvency practitioner

alternatively, consider taking out professional
liability insurance cover, although if the company is already
suffering financial problems, it is probably too late.

Article
First Published: 25 January 2004

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